Five reasons why big business is not trusted on the EU

David Green, 7 March 2016

The government thinks it can frighten people into voting to stay in the EU by getting businesses to say that leaving will threaten investment and jobs. Their assumption is that it worked for the Scottish referendum and it could tip the balance in the EU vote. There are at least five reasons why it’s not working this time.

First, many business leaders want to leave the EU and with so much dissent the voice of business is less persuasive. That is why corporate enthusiasts for the EU are trying to create a false impression of unanimity. The removal of John Longworth as director general of the British Chambers of Commerce is the most striking recent example so far of the deployment of intimidation to suppress freedom of speech.

Second, big business cried wolf over the euro. The warnings of catastrophe if we did not join the euro were so completely wrong that some cheerleaders have even expressed regret, including Andrew Gowers, editor of the Financial Times from 2001-2006. In an article in the Sunday Times (13 November 2011) he said:

‘It’s confession time. Exactly 10 years ago, I was cheering as the preparations to launch notes and coins for Europe’s bold new single currency reached their climax. For more than a decade before that, mine was among the voices egging on Europe’s leaders… In the years that followed … I was one of those celebrating its success and urging Britain to join the party. I now believe I was wrong.’

By 2011 he thought that eurozone leaders were struggling impotently with debts and deficits, with stricken banks and sluggish economies.

Third, big business is no longer trusted to act like a good citizen. International corporations are seen as self-serving organisations with little commitment to the countries in which they operate. Two main issues stand out. Numerous international companies have plainly manipulated taxation rules to pay less tax by concealing their true profits or diverting them to tax havens. The scale of abuse is such that even the British Government has introduced a diverted profits tax. On immigration, corporations do not consider the implications for public services. They see it as a good way of keeping wages down in order to enhance corporate profits, as Lord Rose recently confirmed. International companies do not feel like or act as if they are citizens. They locate for corporate convenience only, but no society can flourish if everyone does only the bare minimum required by law. Unlike international companies, many of our small and medium sized firms act as if they are individuals with the same moral obligations as other citizens, worrying about apprenticeships, trying to avoid redundancies, and treating their workforce fairly.

Fourth, many supporters of free enterprise have started to distance themselves from business interests. In particular they often distinguish between big business and SMEs or entrepreneurs. They are the intellectually consistent supporters of personal freedom and competition, following in a long line of writers from Adam Smith to Milton Friedman. Smith barely had a good word for business and famously said: ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.’ Friedman warned against automatic support for business interests in a talk in 1998: ‘Those of us who have defended a free market have, over a long period of time, become accustomed to being called apologists for big business. But nothing could be farther from the truth. There’s a real distinction between being in favour of free markets and being in favour of whatever business does.’

A similar view was recently voiced by Allister Heath in the Telegraph. Some big businesses are ‘experts at regulatory capture and using restraints to competition as a mechanism to grab economic rents. They support and in the short-term benefit from rigged, controlled markets, rather than truly free ones’. This attitude, he thought, explained why they often supported EU membership.

Fifth, there is far wider awareness that the EU administration in Brussels is especially vulnerable to capture by self-serving corporate interests. Matt Ridley, another enthusiast for free enterprise, said in The Times (22 Feb 2016):

‘The way in which Volkswagen, using carbon-dioxide emissions as a cover, got the rules rewritten to suit diesel engines and discriminate against petrol engines, despite the fact that nitrogen oxide and particulate emissions from diesel were far higher and more dangerous, was only the most visible such scandal.’

Sir James Dyson has spoken out against the regulation of vacuum cleaners, which he says is rigged to suit his main rivals, the German bagged vacuum cleaner manufacturers: ‘Washing machines are tested with washing in them, cars are tested with people in them, and fridges are tested with food in them. But when it came to our request to test vacuum cleaners with dust in them, the big German block of manufacturers complained.’

Tory MEP Dan Hannan has criticised the restrictions imposed in 2011 on natural and alternative medicines to suit big pharmaceutical corporations, who lobbied openly and enthusiastically for its adoption. The large chains were able to afford the compliance costs but smaller herbalists were not. Above all, he argued, the ban would never have got through national parliaments:

‘MPs would have been deluged, as MEPs were, by letters from thousands of constituents who felt that their health was being imperilled. In a national parliament, this would almost certainly have been enough to block the proposal; but the EU was designed more or less explicitly to withstand public opinion. Lobbyists understood from the outset that their best chance was to push through in Brussels what no democratic parliament would accept.’

The EU, he concluded, has become a mechanism for the advancement of corporate interests in defiance of the common weal.